Sunday, August 08, 2004
I just finished the first chapter and a skim of Howard Smith and Peter Fingar's Business Process Management: The Third Wave. This post is an amalgam of their ideas and mine. I've been obsessed with the metric of time today, exploring where layers that usually move in tandem seem out of sync. Reviewing Steward Brand's How Buildings Learn and Clock of the Long Now brought up parallels to my thinking about the rhythm of business, the future of work, and the assimilation of the Net into virtually everything, so don't blame Howard and Peter if the following words don't speak to you.
Many people were relieved when the dot.com bubble burst. Back to business as usual. Enough of this virtual nonsense. No more twenty-somethings cashing in on paradigm shifts. The skeptics won't like what I'm about to write: the bubble was just an early ripple in a sea change that's going to restructure business, economics, trade, work, and management on a scale never before imagined.
For the better part of the last 200 years, an enterprise has consisted of several businesses lodging under one roof. There's a customer-acquisition business, a product-innovation- and-development business, an infrastructure management business, and support services such as HR, finance, & training.
It once made economic sense to keep all these processes in-house. (It would have cost too much to manage an outsider to do them.) Now the Internet has trivialized the cost of farming things out.
The current rule is to outsource the non-essentials. Example: Let UPS handle our shipping. They are better at managing delivery than we are. Better to free up some cash by having UPS own the trucks instead of us. Invest the money in our core competence (what we do best). Since this is what we excel at, we should extract a higher return on our investment. Using someone else's assets like this enables us to do more with less. Nike doesn't manufacture shoes. Cisco doesn't make routers. We could all hand off less-rewarding functions and be better off.
Time and time again in business history, an upstart outsider topples a market leader. Inevitably, the new leader enjoys a cost advantage in the neighborhood of 30%. How? By managing the costs of an entire value chain rather than just its "own" costs. They're all costs to the customer, no matter who owns the means of production. Business management becomes less like Monopoly, owning and managing assets, and more like Chess, making a series of good moves.
A game of Monopoly can wipe out an entire afternoon, but a chess master can play two dozen games at once, often declaring victory in less than fifteen minutes. Few enterprises are swift enough to mix and match steps in their value chains at the speed of the top players. The chess board these losers face is always two moves behind.
It's as if the losers' view of what's happening has been trapped in some terrible time-delay. You see, yesterday's managers came up with the best ways to do things, and they handed it off to their IT departments to implement. IT translated these solutions into indecipherable code. This was equivalent to carving the way they did things in stone and pitching them into a black hole. When conditions changed, obsolescence was assured. And change is rampant.
IT is not the bad guy here. Until quite recently, computer technology was so immature that years of study and teams of experts were required to communicate with the systems. Computers required users to bend to their will, to speak their arcane langauge, and to make people serve them rather than the other way around. This is about to change.
In the near future, business processes will be exposed for all to see. They will be like a document on the web. Since there's only one copy, everyone sings from the same hymnal. It's quick. It will always be up to date. Write once, read many.
Granted, the views on screen will differ by individual. The business analyst will see a process flow diagram that she can manipulated in real time. The business manager will monitor results from an executive cockpit with the ability to what-if analyze reconfigurations of the business. The worker will see a derivative of the process in a transactional portal or portable device. The programmer, who generally won't be that involved since changes to the process automatically change the underlying code, will see the process at the code and interface level.
As the inside flap of Peter Fingar and Howard Smith's book puts it, "Don't bridge the business-IT divide, obliterate it."
Many people were relieved when the dot.com bubble burst. Back to business as usual. Enough of this virtual nonsense. No more twenty-somethings cashing in on paradigm shifts. The skeptics won't like what I'm about to write: the bubble was just an early ripple in a sea change that's going to restructure business, economics, trade, work, and management on a scale never before imagined.
For the better part of the last 200 years, an enterprise has consisted of several businesses lodging under one roof. There's a customer-acquisition business, a product-innovation- and-development business, an infrastructure management business, and support services such as HR, finance, & training.
It once made economic sense to keep all these processes in-house. (It would have cost too much to manage an outsider to do them.) Now the Internet has trivialized the cost of farming things out.
The current rule is to outsource the non-essentials. Example: Let UPS handle our shipping. They are better at managing delivery than we are. Better to free up some cash by having UPS own the trucks instead of us. Invest the money in our core competence (what we do best). Since this is what we excel at, we should extract a higher return on our investment. Using someone else's assets like this enables us to do more with less. Nike doesn't manufacture shoes. Cisco doesn't make routers. We could all hand off less-rewarding functions and be better off.
Time and time again in business history, an upstart outsider topples a market leader. Inevitably, the new leader enjoys a cost advantage in the neighborhood of 30%. How? By managing the costs of an entire value chain rather than just its "own" costs. They're all costs to the customer, no matter who owns the means of production. Business management becomes less like Monopoly, owning and managing assets, and more like Chess, making a series of good moves.
A game of Monopoly can wipe out an entire afternoon, but a chess master can play two dozen games at once, often declaring victory in less than fifteen minutes. Few enterprises are swift enough to mix and match steps in their value chains at the speed of the top players. The chess board these losers face is always two moves behind.
It's as if the losers' view of what's happening has been trapped in some terrible time-delay. You see, yesterday's managers came up with the best ways to do things, and they handed it off to their IT departments to implement. IT translated these solutions into indecipherable code. This was equivalent to carving the way they did things in stone and pitching them into a black hole. When conditions changed, obsolescence was assured. And change is rampant.
IT is not the bad guy here. Until quite recently, computer technology was so immature that years of study and teams of experts were required to communicate with the systems. Computers required users to bend to their will, to speak their arcane langauge, and to make people serve them rather than the other way around. This is about to change.
In the near future, business processes will be exposed for all to see. They will be like a document on the web. Since there's only one copy, everyone sings from the same hymnal. It's quick. It will always be up to date. Write once, read many.
Granted, the views on screen will differ by individual. The business analyst will see a process flow diagram that she can manipulated in real time. The business manager will monitor results from an executive cockpit with the ability to what-if analyze reconfigurations of the business. The worker will see a derivative of the process in a transactional portal or portable device. The programmer, who generally won't be that involved since changes to the process automatically change the underlying code, will see the process at the code and interface level.
As the inside flap of Peter Fingar and Howard Smith's book puts it, "Don't bridge the business-IT divide, obliterate it."
BETA | jay 8/08/2004 12:20:00 AM| WRITE JAY |
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